You can use the Award Optimization feature to generate award recommendations. You can either choose the default recommendation (which awards based on response rank only), or you can create an award scenario and have Award Optimization generate award recommendations based on that scenario. When the optimization engine calculates the response price, it considers cost factors (if "Transform supplier responses" was selected) and quantity-based price tiers to which the supplier responded.
Award Optimization allows you to define finely-tuned what-if award scenarios which you can use to mirror your procurement best practices or legal requirements. You can create multiple award scenarios and compare the different recommendations generated by Award Optimization. Thus you can use Award Optimization as a decision support tool to evaluate your supplier responses to provide the best award recommendation.
Prioritizing Constraints
For each scenario, you can define one or more constraints specifying certain conditions the award decision should meet. You can define constraints at the header, line, and supplier levels. You can define business related constraints. You can define constraints related to all suppliers, suppliers from the Approved Supplier List, and/or specific suppliers.
You can also prioritize your constraints. If you select Mandatory from the Constraint Priority menu, the resulting award decisions generated by the optimization engine must meet all constraints. Otherwise, if you select User Specified, you can assign a priority for each constraint you define. In this case, you designate a priority, from 1 to 4 for each constraint you define. Priority 1 constraints are considered critical and have the highest priority. The optimization engine will try to meet all the criteria if possible, but if no result set meeting all the constraints exists, the engine will begin relaxing the low level constraints and re-optimize until a result set can be found. For example, if on the first optimization attempt there is no result set that meets all constraints, the engine will optimize again, but this time it will relax any priority 4 constraints. It will continue ignoring successively higher priority constraints until a result set can be created.
Note: In general, the optimization engine will try to relax constraints with lower priorities first. However, in some cases, it may find a solution by relaxing constraints with higher priorities while meeting constraints with lower priorities.
Determining Cost of Constraints
For any constraint you define, you can calculate the cost of that constraint. That is, you can calculate the award amount with the constraint in effect and compare it to the award amount without the constraint in effect. This gives you the "cost" of having the constraint in effect. For example, assume Buyer ABC has an auction with two lines, line one for 100 widgets, and line two for 25 bolts.
| Supplier | Line One Bid | Line Two Bid |
|---|---|---|
| Supplier 123 | $18 | $8 |
| Supplier 987 | $15 | $10 |
Based on the bid prices alone, the optimization engine would recommend awarding the entire 100 widgets to Supplier 987 for a total of $1500 and all 25 bolts to Supplier 123 for a total of $200 for a total award amount of $1700. But assume that because of poor performance history, Buyer ABC has created a constraint specifying that no more than $1000 can be awarded to Supplier 987. In this case, the engine would recommend awarding Supplier 987 only 66 widgets (66 * $15 = $990) and the remaining 34 widgets to Supplier 123 (34 * $18 = $612) for a total award amount of $1602. (Note that in both cases, the entire 25 bolts are awarded to Supplier 123, so the constraint on Supplier 987 is irrelevant on line two.) By comparing the two scenarios, the "cost" of the constraint on Supplier 987 is ($1602 - $1500) = $102.
Note that you can only determine the cost of a single constraint. If there are multiple constraints in effect for the scenario, you compare the cost of the single constraint against scenario with all the remaining constraints in effect. Also note that if the processing required for determining constrain cost is sufficient, a concurrent request is generated to determine the constraint cost.
Using the Optimization Engine
While the negotiation is still open, you can use AutoAward (System Generated) scenario to generate the default award recommendation based on the responses received so far. If you wish to create different what-if scenarios, however, you must close the negotiation first.
Creating a Scenario
From the negotiation summary page, select the Award Optimization option from the Actions menu and click Go.
On the Award Optimization page, click Create Scenario. Note that the scenario name is the only required field. Complete as many additional fields or combination of fields to fully describe the requirements of your scenario.
On the Create Award Scenario page,
Enter a scenario name.
Select an objective from the drop down menu.
Specify how constraints are prioritized. Mandatory specifies that all constraints are required. Any award decision must meet all constraint criteria. User Specified allows you to specify the priority for constraints (see Prioritizing Constraints above).
Specify whether or not to transform supplier responses.
Provide any internal notes.
Specify any header constraints
The minimum total award amount - the minimum amount this scenario will award.
The maximum total award amount - the maximum amount this scenario will award.
Also, for Requirement
The minimum total score.
The minimum score for each Requirement
The minimum score for any line attributes (for Multi-Attribute Scoring negotiations only).
Select a negotiation line and specify any line constraints. Note: Line-level scenario constraints cannot be used with large or very large negotiations. For each line of the negotiation, you can:
Choose to allow the line to be split among suppliers.
Require integer quantity awards. This means fractional awards are not allowed.
Specify a minimum and/or maximum number of units to be awarded for that line.
Specify a minimum and/or maximum amount that can be awarded for that line.
Click the Additional Line Constraints icon (the pencil icon) to define additional constraints for the line (if there is a Priority field, you can specify the weighting for this constraint). For each line you can:
Minimum response quantity for this line
Maximum response price allowable for this line
Specify a date range within which the promise date must fall.
Specify the minimum and maximum number of suppliers to which this negotiation line must be awarded.
Specify the minimum and maximum award amount, award amount percentage, award quantity, and award quantity percentage which can be awarded to any one supplier, as well as the minimum and maximum award amount or quantity which can be given to any individual supplier/supplier site/contact combination.
Click Apply to return to the Create Award Scenarios page. Specify supplier constraints. You can define very in-depth supplier restrictions. You can:
Exclude suppliers with purchase orders on hold.
Select the minimum or maximum number of suppliers to award business to.
Specify by amount or percentage, a minimum and/or maximum amount of business to award to:
incumbent suppliers
any single supplier.
any supplier of a particular business classification.
any supplier having a particular Approved Supplier List status.
any particular combination of supplier/supplier/site/contact.
Optimizing Scenarios
Once you have a scenario created, you can use the optimization engine to generate suggested award decisions. To use the award scenario to generate award decisions, click Optimize.
If Award Optimization can use the scenario definition to generate award recommendations, the Optimization Results page shows the recommendations generated. If you have prioritized constraints, the optimization engine will re-optimize ignoring lower priority constraints until it can generate an award recommendation (see Prioritizing Constraints above). If no award recommendations can be generated, an information page displays, informing you that no recommendations could be made. Click Edit scenario to make your scenario criteria less restrictive. Click Apply to save your changes and re-optimize.
If your negotiation is a very large negotiation, a concurrent program is initiated to generate the award scenario. You are returned to the main optimization page. You can monitor the status of the concurrent program in the Scenario Award Total column.
Comparing Scenario Results
Once you have defined the scenario and optimized the results, you can compare different scenario results by returning to the Award Optimization page by clicking the Award Optimization bread crumb. The Award Optimization page lists all the scenarios you have defined for the negotiation. If there are recommendations generated for a scenario, an icon appears in the Accept column.
If you wish to compare multiple scenario results, select the scenarios and click Compare.
If you wish to calculate the cost of a constraint, click the Scenario Award Total link. On the Award Scenario: Optimization Results page, click Calculate for the constraint whose cost you wish to determine.
Accepting Scenario Results
If you are satisfied with the recommendations based on the scenario, click Accept. If you wish to modify the scenario, click Update Scenario. If you accept the recommendation, any previously existing draft award recommendations are overridden by the new recommendations. You are taken to the Award Summary page, from which you can continue awarding the negotiation.